Risk appetite rises on hopes of inflation spike

USD/CAD Consolidates on Jobs Divergence

The Canadian dollar is stabilizing as a deceleration in job growth could dampen rate hike expectations. Mixed employment data in the United States and Canada may have become the main driver of the loonie’s weakness. While an increase in hiring in the United States could revive the aggressive approach of the Fed, the lackluster performance of its northern neighbor could reduce the risks of oversized rate hikes by the Bank of Canada in the future. Meanwhile, the price of oil struggled on global demand uncertainty, casting a cloud over the commodity-linked currency. 1.2520 is an important floor and the previous support to 1.2950 turned into resistance.

NZD/USD rallies as markets take risk

New Zealand Dollar surges ahead of further RBNZ tightening. Markets bet on another 50bps this week from the central bank. According to a recent RBNZ survey, inflation may ease over the coming year. There is growing speculation that the cash rate could peak later this year. In the meantime, hawkish rhetoric and improving risk sentiment would support the kiwi. China’s record trade surplus in July, helped by strong export performance, suggests the global economy has remained resilient, providing tailwinds for the commodity-linked currency. The pair is heading for the June high at 0.6570 and 0.6300 is the closest support.

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XAU/USD Recovers Against Weaker Dollar

Gold could struggle as Fed officials call for more rate hikes to come. Lower US consumer prices pushed the greenback lower, leaving more upside for gold. Traders are hoping that a spike in inflation could prompt the Fed to ease off as early as September. Less aggressive rate hikes would mean a slower rise in real yields, which would benefit the non-yielding metal. The downside risk would be that the US central bank continues to push for its fight against inflation, effectively capping bullion’s rally. The price bounced off the main demand area at 1680 and 1860 from the June sell-off is the main resistance.

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NAS 100 hits 3-month high as risk appetite returns

The Nasdaq 100 consolidates as investors reassess the Fed’s next move. There has been a lot of noise about a coming recession, but the data continues to suggest otherwise. The US labor market is back above its pre-pandemic level and provides a strong signal that the economy is still healthy. Markets tend to price expectations ahead of actual facts, and the absence of tangible signs of recession combined with decent corporate earnings could reduce selling interest. Any dovish attitude on the part of the Fed could be seen as positive by the market. A break above 13550 can open the door at 15000 and 12600 is the closest support.

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Carol N. Valencia